Interest; legal interest; proper rate.

In Eastern Shipping, it was observed that the

commencement of when the legal interest should start to run varies depending on the

PERALTA, J.) SUBJECTS: EXPROPRIATION; INTEREST RATE; CAPITAL GAINS

TAX; DOCUMENTARY STAMP TAX; CONSEQUENTIAL DAMAGES (BRIEF TITLE:
REPUBLIC VS. SORIANO)

factual circumstances obtaining in each case. As a rule of thumb, it was suggested

that where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil
Code) but when such certainty cannot be so reasonably established at the time the

DISPOSITIVE:

demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained).

WHEREFORE, premises considered, the instant pet1t10n 1s PARTIALLY

GRANTED. The Decision and Order, dated November 15, 2013 and March 10,

During the pendency of this case, however, the Monetary Board issued Resolution No.

2014, respectively, of the Regional Trial Court, Valenzuela City, Branch 270, in
Civil Case No. 140-V-10 are hereby MODIFIED, in that the imposition of interest

796 dated May 16, 2013, stating that in the absence of express stipulation between

on the payment of just compensation as well as the award of consequential

the parties, the rate of interest in loan or forbearance of any money, goods or credits

damages are deleted. In addition, respondent Arlene R. Soriano is ORDERED to

and the rate allowed in judgments shall be 6% per annum. Said Resolution is

pay for the capital gains tax due on the transfer of the expropriated property,

embodied in Bangko Sentral ng Pilipinas Circular No. 799, Series of2013, which took

while the documentary stamp tax, transfer tax, and registration fee shall be for
the account of petitioner.

effect on July 1, 2013. Hence, the 12% annual interest mentioned above shall apply
only up to June 30, 2013. Thereafter, or starting July 1, 2013, the applicable rate of
interest for both the debited amount and undocumented withdrawals shall be 6% per
annum compounded annually, until fully paid. Land Bank of the Philippines v.

SO ORDERED.

Emmanuel C. Oate, G.R. No. 192371, January 15, 2014.

SUBJECTS/DOCTRINES/DIGEST:

CASE 2015-0006: REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE

DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, PETITIONERS, -VERSUS
ARLENE R. SORIANO, RESPONDENT (G.R. NO. 211666, 25 FEBRUARY 2015,

PETITIONER CONTENDS THAT THE PAYMENT TO RESPONDENT IS NOT

EFFECTIVE JULY 1, 2013, THE PREVAILING RATE OF INTEREST FOR LOANS

FOREBEARANCE OF MONEY OR CREDIT BUT PAYMENT OF JUST

OR FORBEARANCE OF MONEY IS SIX PERCENT (6%) PER ANNUM, IN THE

COMPENSATION FOR EXPROPRIATED PROPERTY. THEREFORE THE

ABSENCE OF AN EXPRESS CONTRACT AS TO SUCH RATE OF INTEREST.

IMPOSITION OF 12% INTEREST HAS NO BASIS. RATHER ART. 2209 OF THE

CIVIL CODE APPLIES WHICH FIXES THE INTEREST AT 6% PER ANNUM. IS THIS
CONTENTION CORRECT?
IS THE IMPOSITION OF INTEREST WARRANTED IN THIS CASE?

NO.
NO BECAUSE PETITIONER INCURRED NO DELAY IN THE PAYMENT OF JUST
COMPENSATION.
THE RULING ON NATIONAL POWER CORPORATION V. ANGAS HAS ALREADY
BEEN OVERTURNED BY THE RULING IN REPUBLIC V. COURT OF APPEALS,
WHEREIN THE SUPREME COURT HELD THAT THE PAYMENT OF JUST

AS EVIDENCED BY THE ACKNOWLEDGMENT RECEIPT SIGNED BY THE

COMPENSATION FOR THE EXPROPRIATED PROPERTY AMOUNTS TO AN

BRANCH CLERK OF COURT, PETITIONER WAS ABLE TO DEPOSIT WITH THE

EFFECTIVE FORBEARANCE ON THE PART OF THE STATE.

TRIAL COURT THE AMOUNT REPRESENTING THE ZONAL VALUE OF THE

PROPERTY BEFORE ITS TAKING.

IF PAYMENT OF JUST COMPENSATION IS FORBEARANCE WHAT IS THE

APPLICABLE INTEREST?

ARE CONSEQUENTIAL DAMAGES PROPER IN THIS CASE?

6% PER ANNUM.

NO BECAUSE THE ENTIRE AREA OF THE SUBJECT PROPERTY AND NOT

ONLY A PORTION THEREOF IS EXPROPRIATED.

IN LINE WITH THE RECENT CIRCULAR OF THE MONETARY BOARD OF THE

BANGKO SENTRAL NG PILIPINAS (BSP-MB) NO. 799, SERIES OF 2013,

CONSEQUENTIAL DAMAGES ARE AWARDED IF AS A RESULT OF THE

EXPROPRIATION, THE REMAINING PROPERTY OF THE OWNER SUFFERS
FROM AN IMPAIRMENT OR DECREASE IN VALUE.

PETITIONER CONTENDS THAT IT IS THE PROPERTY OWNER THAT IS LIABLE

FOR CAPITAL GAINS TAX AND DOCUMENTARY STAMP TAX. IS THIS
CONTENTION CORRECT.

RESPONDENT LAND OWNER IS LIABLE FOR CAPITAL GAINS TAX BECAUSE IT

HAS BEEN HELD THAT SINCE CAPITAL GAINS IS A TAX ON PASSIVE INCOME,
IT IS THE SELLER, NOT THE BUYER, WHO GENERALLY WOULD SHOULDER
THE TAX. ALSO, THE BIR, IN ITS BIR RULING NO. 476-2013, DATED DECEMBER
18, 2013, CONSTITUTED THE DPWH AS A WITHHOLDING AGENT TO WITHHOLD
THE SIX PERCENT (6%) FINAL WITHHOLDING TAX IN THE EXPROPRIATION OF
REAL PROPERTY FOR INFRASTRUCTURE PROJECTS.

BUT PETITIONER IS LIABLE FOR FOR DOCUMENTARY STAMP TAX. UNDER

THE NIRC BOTH BUYER AND SELLER ARE HELD LIABLE UNLESS THERE IS
AN AGREEMENT. BUT ACCORDING TO PETITIONERS CITIZENS CHARTER,28
WHICH FUNCTIONS AS A GUIDE FOR THE PROCEDURE TO BE TAKEN BY THE

G.R. No. 183290*

July 9, 2014

DPWH IN ACQUIRING REAL PROPERTY THROUGH EXPROPRIATION UNDER

RA 8974 ISSUED BY PETITIONER DPWH ITSELF ON DECEMBER 4, 2013,
EXPLICITLY PROVIDES THAT THE DOCUMENTARY STAMP TAX, TRANSFER
TAX, AND REGISTRATION FEE DUE ON THE TRANSFER OF THE TITLE OF
LAND IN THE NAME OF THE REPUBLIC SHALL BE SHOULDERED BY THE
IMPLEMENTING AGENCY OF THE DPWH.

DEPARTMENT OF AGRARIAN REFORM, represented by SECRETARY NASSER C.

PANGANDAMAN, Petitioner,
vs.
SPOUSES DIOSDADO STA. ROMANA and RESURRECCION O. RAMOS, represented
by AURORA STA. ROMANA, PURIFICACION C. DAEZ, represented by EFREN D.
VILLALUZ and ROSAURO D. VILLALUZ, and SPOUSES LEANDRO C. SEVILLA and
MILAGROS C. DAEZ, Respondents.

RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari 1 are the Decision2 dated March 27, 2008 and
the Resolution3 dated June 12, 2008 rendered by the Court of Appeals (CA) in CA-G.R. SP
Nos. 93132 and 93240 which affirmed the Decision 4 dated October 18, 2005 of the Regional
Trial Court of Guimba, Nueva Ecija, Branch 33 (RTC) in AGR. Case No. 1163-G, 5 fixing the
just compensation for respondents 21.2192-hectare (ha.) land at P2,576,829.94
or P121,438.60/ha., and ordering the Land Bank of the Philippines (LBP) to pay the said
amount in the manner provided by law.
The Facts
Respondents, spouses Diosdado Sta. Romana and Resurreccion O. Ramos, represented
by Aurora Sta. Romana, Purificacion C. Daez, represented by Efren D. Villaluz and Rosauro
D. Villaluz, and spouses Leandro C. Sevilla and Milagros C. Daez, are the owners of a
27.5307-ha. agricultural land situated in San Jose City, Nueva Ecija, covered by Transfer
Certificate of Title No. NT-66211.6 Petitioner, the Department of Agrarian Reform (DAR),
compulsorily acquired a 21.2192-ha. portion (subject land) of respondents property
pursuant to the governments Operation Land Transfer Program 7 under Presidential Decree
No. (PD) 27,8 otherwise known as the "Tenants Emancipation Decree," as amended. On
November 29, 1995, the DAR caused the generation of emancipation patents (EPs) in favor
of the farmer-beneficiaries,9 and, in 1996, the LBP fixed the value of the subject land
at P361,181.8710 (LBP valuation) using the formula11 under Executive Order No. (EO)
22812 and DAR Administrative Order No. (AO) 13, series of 1994, 13 i.e., LV = (2.5 x AGP
x P35.00) x (1.06)n14 .Under this formula, the government support price (GSP) for one (1)
cavan of palay was pegged at P35.00, which is the GSP price set on the date of PD 27s
effectivity on October 21, 1972.15
Dissatisfied with the LBP valuation, respondents filed a Petition for Approval and Appraisal
of Just Compensation before the RTC, docketed as AGR. Case No. 1163-G, averring that:
(a) the LBP valuation was grossly inadequate considering the subject lands proximity to
subdivision lots and commercial establishments; and (b) the fair market value of the subject
land should be fixed in the amount of at least P300,000.00/ha. as some beneficiaries were
even selling their lands to subdivision developers at the price of P1,000,000.00/ha.16
On the other hand, the LBP insisted on the correctness of the valuation, having been
computed in accordance with the formula under EO 228 which governs the determination of
just compensation due a landowner whose property was seized under PD 27. For its part,
the DAR maintained that the proper procedure relevant to the determination of the valuation
was followed, hence, the amount of P361,181.87 or P4,719.77/ha. was in keeping with the
mandate of PD 27.17

The RTC appointed two18 (2) commissioners for the purpose. On August 27, 2004, the
commissioners submitted their report, recommending the amount of P300,000.00/ha. as
reasonable compensation for the subject land. 19
The RTC Ruling
On October 18, 2005, the RTC rendered a Decision 20 rejecting the LBP valuation and fixing
the just compensation of the subject land at P2,576,829.94 or P121,438.60/ha. It explained
that while respondents land was acquired pursuant to PD 27, the same is covered by
Republic Act No. (RA) 6657, 21 otherwise known as the "Comprehensive Agrarian Reform
Law of 1988," as amended, which provides that in determining just compensation, the
factors under Section 17 of RA 6657, as amended, should be considered. 22 It likewise
pointed out that t he Court, in the case of LBP v. Spouses Banal, 23 had declared that the
abovementioned factors have already been translated into a basic formula in DAR AO 6,
series of 1992,24 as amended by DAR AO 11, series of 1994, 25 i.e., LV = (CNI + 0.6) + (CS x
0.3) + (MV x 0.1).26 Considering the availability of only the CS 27 and MV28 factors, the RTC
applied the formula LV = (CS x 0.9) + (MV x 0.1) in fixing the just compensation for the
subject land.29
The DAR and the LBP filed separate motions for reconsideration which were, however,
denied by the RTC. Hence, they filed separate appeals before the CA, respectively
docketed as CA-G.R. SP Nos. 93132 and 93240, that were, thereafter, consolidated by the
CA on August 31, 2006.30
The CA Ruling
In a Decision31 dated March 27, 2008, the CA affirmed the RTC Decision, explaining that the
expropriation of a landholding covered by PD 27, such as that of the subject land, is not
considered to have taken place on the effectivity of the said decree, or on October 21, 1972,
but at the time payment of just compensation is made, as judicially determined. Thus, it
would be inequitable to base the amount of just compensation on the guidelines provided by
PD 27 and EO 228 when the seizure of the subject land took place after the enactment of
RA 665732 on June 15, 1988. The acquisition of the subject land having been initiated only in
1995, the LBP valuation using the formula under EO 228 was confiscatory , as just
compensation should constitute the full and fair equivalent of the property when it is taken.
Considering that the agrarian reform process remained incomplete as the payment of the
just compensation for the subject land has yet to be made, and in view of the passage of RA
6657 in the interim, the CA upheld the RTC valuation as having been computed in
accordance with Section 17 of RA 6657, as amended. 33
The motions for reconsideration filed by the DAR and the LBP were denied in a
Resolution34 dated June 12, 2008, hence, the instant petition by the DAR which was
subsequently consolidated35 with the LBPs petition in G.R. Nos. 183298-99.
The Issue Before the Court

The essential issue for the Courts resolution is whether or not the subject land was properly
valued in accordance with the factors set forth in Section 17 of RA 6657, as amended. The
Proceedings Before the Court
In a Resolution36 dated October 12, 2009, the parties were directed to file their respective
memoranda. In lieu of a memorandum, however, the LBP filed a manifestation and
motion37 (motion to withdraw and to remand) in G.R. Nos. 183298-99 (a) averring that the
matter of computation of just compensation had been rendered moot and academic by the
enactment of RA 9700,38 which ordains that when the valuation of previously acquired lands
is challenged by the landowner, the same shall be completed and finally resolved pursuant
to Section 17 of RA 6657, as amended; 39 and (b) praying that it be allowed to withdraw its
petition and that the case be remanded to the RTC for re-computation of the just
compensation of the subject land 40 based on the factors set forth under Section 17 of RA
6657, as amended, in relation to Section 5 41 of RA 9700.
The respondents in the said cases, who are the same respondents in the instant case, did
not oppose the motion to withdraw and to remand, which the Court granted in a
Resolution42 dated January 18, 2010. Neither did they file any motion for reconsideration
therefrom.
On the other hand, the DAR filed a memorandum, 43 praying for the adoption of the LBP
valuation for the subject land, or in the alternative, for a similar remand of the case to the
RTC for further proceedings to determine the value of the land in accordance with existing
provisions of law and applicable administrative issuances.
The Courts Ruling
Settled is the rule that when the agrarian reform process is still incomplete, as in this case
where the just compensation for the subject land acquired under PD 27 has yet to be paid,
just compensation should be determined and the process concluded under RA 6657, 44 with
PD 27 and EO 228 having mere suppletory effects. This means that PD 27 and EO 228 only
apply when there are gaps in RA 6657; where RA 6657 is sufficient, PD 27 and EO 228 are
superseded.45
For purposes of determining just compensation, the fair market value of an expropriated
property is determined by its character and its price at the time of taking. 46 In addition, the
factors enumerated under Section 17 of RA 6657, 47 i.e., (a) the acquisition cost of the land,
(b) the current value of like properties, (c) the nature and actual use of the property, and the
income therefrom, (d) the owner's sworn valuation, (e) the tax declarations, (f) the
assessment made by government assessors, (g) the social and economic benefits
contributed by the farmers and the farmworkers, and by the government to the property, and
(h) the non-payment of taxes or loans secured from any government financing institution on
the said land, if any , must be equally considered.1wphi1
The Court has gone over the records and observed that the only factors considered by the
RTC in determining the just compensation for the subject land were (a) the acquisition price

of a 5.5825-ha. landholding situated in the same locality paid to the owner on November 17,
1997,48 and (b) the market value of the subject land declared by the respondents, without a
showing that the other factors under Section 17 of RA 6657 , as amended, were even taken
into account or, otherwise, found to be inapplicable , contrary to what the law requires.
Consequently, the CA erred in upholding the RTCs valuation as having been made in
accordance with Section 17 of RA 6657, as amended.
This, considering too that the records of AGR. Case No. 1163-G on LBPs petition for
review, docketed as G.R. Nos. 183298-99, had already been remanded to the RTC, the
Court finds that there is a need to make a similar remand of DAR s present petition in this
case also stemming from AGR. Case No. 1163-G to the same RTC for the determination of
just compensation in accordance with Section 17 of RA 6657, as amended. Aside from the
requirement and need to apply the factors under Section 17 of RA 6657, as amended, this
course of action is also meant to avoid the possibility of any conflict or inconsistency with
any eventual ruling in AGR. Case No. 1163-G. To this end, the RTC is hereby directed to
observe the following guidelines in the remand of the case:
1. Just compensation must be valued at the time of taking, or the time when the landowner
was deprived of the use and benefit of his property, such as when title is transferred in the
name of the Republic of the Philippines.49 Hence, the evidence to be presented by the
parties before the trial court for the valuation of the subject land must be based on the
values prevalent on such time of taking for like agricultural lands. 50
2. The evidence must conform with Section 17 of RA 6657, as amended, prior to its
amendment by RA 9700. It bears pointing out that while Congress passed RA 9700 on July
1, 2009, amending certain provisions of RA 6657, as amended, among them, Section 17,
and declaring "(t)hat all previously acquired lands wherein valuation is subject to challenge
by landowners shall be completed and finally resolved pursuant to Section 17 of [RA 6657],
as amended,"51 the law should not be retroactively applied to pending claims/cases. In fact,
DAR AO 2, series of 2009, 52 implementing RA 9700, expressly excepted from the
application of the amended Section 17 all claim folders received by LBP prior to July 1, 20
09, which shall be valued in accordance with Section 17 of RA 6657, as amended, prior to
its further amendment by RA 9700.53
With this in mind, the Court, cognizant of the fact that the instant petition for review on
certiorari was filed on July 21, 2008, 54 or long before the passage of RA 9700, finds that
Section 17 of RA 6657, as amended, prior to its further amendment by RA 9700, should
control the challenged valuation. In the event that the respondents had already withdrawn
the amount deposited by the LB P, the withdrawn amount should be deducted from the final
land valuation to be paid by LBP.55
3. The Regional Trial Court may impose interest on the just compensation award as may be
warranted by the circumstances of the case.56 In previous cases, the Court has allowed the
grant of legal interest in expropriation cases where there is delay in the payment since the
just compensation due to the landowners was deemed to be an effective forbearance on the
part of the State.57 Legal interest shall be pegged at the rate of 12% interest per annum
(p.a.). from the time of taking until June 30, 2013 only. Thereafter, or beginning July 1, 2013,

until fully paid, the just compensation due the landowners shall earn interest at the new
legal rate of 6% interest p.a. in line with the amendment introduced by BSP-MB Circular No.
799,58 series of 2013.59
4. The Regional Trial Court is reminded, however, that while it should take into account the
different formula created by the DAR in arriving at its just compensation valuation, it is not
strictly bound thereto if the situations before it do not warrant their application. As held in
LBP v. Heirs of Maximo Puyat:60
[T]he determination of just compensation is a judicial function; hence, courts cannot be
unduly restricted in their determination thereof. To do so would deprive the courts of their
judicial prerogatives and reduce them to the bureaucratic function of inputting data and
arriving at the valuation. While the courts should be mindful of the different formulae created
by the DAR in arriving at just compensation, they are not strictly bound to adhere thereto if
the situations before them do not warrant it. Apo Fruits Corporation v. Court of Appeals
thoroughly discusses this issue, to wit:
"x x x [T]he basic formula and its alternativesadministratively determined (as it is not found
in Republic Act No. 6657, but merely set forth in DAR AO No. 5, Series of 1998)although
referred to and even applied by the courts in certain instances, does not and cannot strictly
bind the courts. To insist that the formula must be applied with utmost rigidity whereby the
valuation is drawn following a strict mathematical computation goes beyond the intent and
spirit of the law. The suggested interpretation is strained and would render the law inutile.
Statutory construction should not kill but give life to the law. As we have established in
earlier jurisprudence, the valuation of property in eminent domain is essentially a judicial
function which is vested in the regional trial court acting as a SAC, and not in administrative
agencies. The SAC, therefore, must still be able to reasonably exercise its judicial discretion

in the evaluation of the factors for just compensation, which cannot be arbitrarily restricted
by a formula dictated by the DAR, an administrative agency. Surely, DAR AO No. 5 did not
intend to straightjacket the hands of the court in the computation of the land valuation. While
it provides a formula, it could not have been its intention to shackle the courts into applying
the formula in every instance. The court shall apply the formula after an evaluation of the
three factors, or it may proceed to make its own computation based on the extended list in
Section 17 of Republic Act No. 6657, which includes other factors[.] x x x." 61
WHEREFORE, the petition is DENIED insofar as it seeks to sustain the valuation of the
21.2192-hectare portion of respondents' property made by the Land Bank of the Philippines.
The Decision dated March 27, 2008 and the Resolution dated June 12, 2008 rendered by
the Court of Appeals in CAG.R. SP Nos. 93132 and 93240 upholding the said valuation
which did not consider the factors enumerated under Section 17 of Republic Act No. 6657,
as amended, are hereby REVERSED and SET ASIDE. The Department of Agrarian
Reform's petition stemming from AGR. Case No. 1163-G is REMANDED to the Regional
Trial Court of Guimba, Nueva Ecija, Branch 33 for reception of evidence on the issue of just
compensation in accordance with the guidelines set in this Decision. The trial court is
directed to conduct the proceedings in said case with reasonable dispatch and to submit to
the Court a report on its findings and recommended conclusions within sixty (60) days from
notice of this Decision.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice